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Consumer Market Monitor Quarter 2 2011

The Consumer Market Monitor is designed to track key indicators of confidence and activity in the Irish consumer market as a resource for marketers and the wider business community.Download

Overview

Second quarter figures show a decline in retail sales of 1.7pc, wiping out a modest recovery in the first quarter. Excluding the motor trade, which was heavily influenced by the scrappage scheme, no retail category has grown in value.

“The latest official forecast by the Central Bank is for consumer spending to level off in 2012 at -0.6pc with a return to growth of about 1pc per annum after that,” said Mary Lambkin, Professor of Marketing at UCD Smurfit School. “It would be nice to believe that this is correct but reality suggests a less favourable picture against a continuing downward trend in incomes and employment. In fact, it is very difficult to see where any recovery can come from as price increases and additional taxes erode spending power”.

However, Ireland’s level of consumer confidence does not match the poor performances in spending. The confidence index reported a seven-month high in March 2011 at -15, a 40pc improvement from December 2010. While it dipped in April it recovered again to reach -15 in June 2011. According to the report, this figure is the same as the UK’s but lower than Europe’s -11 and may reflect reduced consumer indebtedness.

Residential mortgage lending, which accounts for 85pc of all personal sector credit, has, according to the monitor, continued to drop in 2011 with loans to households down 4.8pc year-on-year to May 2011.

Loans for house purchases were 2.1pc lower, while lending for other purposes declined by 13.6pc, which the monitor concludes as indicating that consumers are reluctant to borrow and prefer to either save or pay off their current debts. This is consistent with the monitor’s report on Ireland’s declining credit card debt of 7pc for the first half of 2011 and a continuing forecast for savings to stay above 10pc until 2013.

The number of houses for sale has remained flat at about 60,000 nationally since the middle of 2008, with 33,000 empty or incomplete new houses. The monitor suggests, however, that the higher than expected rate of new household formation, of 41,000 per year between 2006 and 2011, gives some cause for optimism that demand and supply will come back into balance over the next few years.

“Although the retail sector fared quite badly in this quarter’s monitor, it has been encouraging to see that the motor industry performed quite well even with the end of the scrappage scheme,” said Tom Trainor, chief executive of the Marketing Institute of Ireland. “My concern is that, with prices of essential items rising substantially in areas such as housing, water, electricity, gas and other fuels (9.3pc), miscellaneous goods and services (8.3pc), communications (4.1pc) and health (4pc), marketers will have to work harder than ever for a share of consumers’ disposable income.”

The Consumer Market Monitor uses quarterly data collected from sources including the Central Statistics Office (CSO), the Central Bank, the European Commission, and various other secondary sources.

About the author

The Consumer Market Monitor is a service provided by The Marketing Institute of Ireland in collaboration with the UCD Smurfit Graduate Business School.